Goldman's "She's just a girl" defense against SEC charges

She doesn’t show up by name in the charges of civil fraud that the SEC has brought against Goldman. But Reuters reported yesterday that emails written by Gail Kreitman, a Goldman Sachs bond saleswoman until June 2009, are cited by the SEC to show that Goldman misled ACA Capital Management, the company hired to oversee the construction of the Abacus portfolio, and the customers that bought the deal.

In Kreitman’s emails to ACA executive Laura Schwartz she doesn’t correct Schwartz when she refers to hedge fund Paulson & Co. as an equity investor in Abacus. In fact, Goldman knew that Paulson wasn’t an investor and that the fund was actively betting that Abacus would fall in price. Paulson, the SEC says, was involved in the selection of the mortgage-backed securities that went into the Abacus 2007-ADC-1 synthetic collateralized debt obligation and used that involvement to structure Abacus to fail. Goldman’s alleged failure to disclose Paulson’s involvement is a key element in the SEC’s charge of fraud against Goldman. (Paulson & Co. was not named in the complaint. Goldman has said that the SEC charges have no basis in fact.)

Kreitman’s emails clearly make Goldman Sachs nervous. In a legal filing submitted to the SEC last September, Reuters reported, Goldman’s lawyers pulled out every argument they could think of for why Kreitman’s emails didn’t mean what they seem to mean because

Kreitman was merely an intermediary in charge of the relationship with ACA Capital.

Kreitman, who as Reuters reports graduated from Wharton School of Business in 1991 and had worked at Lehman Brothers and Merrill Lynch before coming to Goldman in 2006, didn’t really understand the significance of Schwatz’s belief that Paulson & Co. was an equity investor.

In other words, the boys at Goldman are arguing in their defense, it was just two girls talking and nobody should really expect that they understand this really complicated stuff anyway.